BG Group A market leader in Global LNG The Houstonian 11th Sept 2006
BG Group Ashley Almanza Chief Financial Officer
BG Group a market leader in Global LNG Objectives BG Groups sources of competitive advantage Progress report BG Groups plans to grow this business Financial returns BG Group a market leader in Global LNG 4
BG Group strategy Integrated Gas Major Integrated Gas Major Connect gas to Secure low cost high value markets resources Build & access markets Equity reserves Serve customers Contracted resources Skills to succeed across…
BG Group strategy LNG Business Models Portfolio Niche Resource Markets National Banks Champions Gas Integrated Terminal & Buyers & developers Players Marketers Resource led Ship owners IOCs Examples Examples Sonatrach,…
BG Group competitive advantage BG Groups competitive advantage in LNG Differentiated strategy Flexible LNG portfolio today Cost competitive long-term supply Cost competitive liquefaction, shipping & regasification A track…
BG Group business portfolio BG Groups LNG activities today Shipping ELNG 1 ELNG 2 Damietta Elba Island Asian Lake Charles market sales ALNG 1 ALNG 2 NLNG 4/5 ALNG 3 ALNG 4 Exports Purchase * Term contracts (4 yrs)…
BG Group business portfolio BG Groups LNG activities future UK Providence Brindisi Shipping ELNG 1 ELNG 2 ELNG 3 Elba Island Mauritania Asian Lake Charles OKLNG market sales ALNG 1 ALNG 2 NLNG 4/5 ALNG 3 Brass LNG ALNG…
BG Group business portfolio BG Groups LNG supply portfolio BG supply (mtpa) CAGR 20-25% 2005-12 30 Overall 2012 outcome of 24-30 mtpa Supply Options Brass 25 CAGR 28% 2005-09 OKLNG ELNG Train 3 New Trinidad 20 Further Nigeria…
BG Group business portfolio BG Groups regas capacity Exercisable options allow regas expansion to 43 mtpa 50.0 Under Chile negotiation 40.0 Exercisable Expansion options options 30.0 mtpa Under Dragon LNG 20.0…
BG Group financial returns Financial returns Global LNG outlook Capital invested Return * Liquefaction 2006 - 0.9bn 2006 c 10% 2009 - 1.0bn Post 2006 c 13% Shipping Volumes EBITDA margin ** and 2006 - 12.9 mtpa 2006 c 9%…
BG Group a market leader in Global LNG BG Groups LNG segment Existing plans are being achieved Developing new activities Portfolio flexibility will continue to add value Strong profit growth Durable competitive position…
BG Group Martin Houston EVP Global LNG and MD North America & Caribbean
BG Group a market leader in Global LNG BG Groups LNG strategy Market focused Integrated Portfolio business model Competitively priced regas Portfolio of long-term and flexible supply A sustainable source of competitive…
BG Group LNG industry context
Industry context for BG Group strategy LNG industry context A high growth segment Trade complexity increasing Atlantic & Pacific rebalancing High growth and trade evolving 17
Industry context for BG Group strategy A high growth business Worldwide LNG trade (mt) CAGR 2005 2010 300 250 Oil worldwide 2% 200 Gas worldwide 3% 150 100 LNG worldwide 13% 50 LNG in N. America 33% 0 2005 2006 2007 2008…
Industry context for BG Group strategy Historical context 400 N. America 350 Europe 300 Asia Pacific (LNG growth 2005 2010 CAGR 13%) 250 Industry mtpa 200 inflection point 150 (LNG growth 1980 2004 CAGR 7%) 100 50…
Industry context for BG Group strategy Global gas trade the recent past Algeria Middle East Trinidad W.Africa S.E.Asia Markets Australia LNG Pipe Source : BG Group Industry evolution: from three main trade regions 20
Industry context for BG Group strategy Global gas trade gradually evolving Norway / Russia Sakhalin Egypt Middle East Algeria W.Africa Trin / Ven S.E.Asia S. America Markets Australia LNG Pipe Source : BG Group…
Industry context for BG Group strategy Industry focus changing LNG trade (mtpa) 200 North America 180 160 Europe 140 Asia Pacific 120 100 80 60 40 20 0 Atlantic Pacific Atlantic Pacific Atlantic Pacific Basin…
Industry context for BG Group strategy Industry context key changes Commodity price increased US market role emerging Supply-demand tightening Key changes but BG Group competitive position locked in 23
Industry context for BG Group strategy Impact of increased price expectations Forward curve prices for 2010 (12 month avg.) LNG trade is globalising /mmBtu /bbl 12 70 Asia no longer always the HH (/mmBtu) 10 Brent (/bbl) 60 premium…
Industry context for BG Group strategy Role of the US market emerging US market *Japan, Traditional LNG markets (EU, JKT*) S.Korea, Taiwan Deep, liquid market Sticky markets not fungible Spot cargo sink/source Strong seasonal…
Industry context for BG Group strategy Supply / demand balance 2004 Atlantic Basin supply tightness became apparent New US terminals announced for 2008/9 UK re-emerging as LNG importer 2010+ supply projects slipping 2005 Pacific…
Industry context for BG Group strategy Value of flexibility becoming apparent A number of unpredictable events in 2005/06 Weather, technical, political Increased inter-basin spot trade Short-term & spot cargoes priced at a premium…
Industry context for BG Group strategy Implications for BG Group Early recognition of key trends Role of US Supply short world Value of flexibility Allowed BG Group to capture: Key fungible market position at Lake Charles…
Industry context for BG strategy BG Group Atlantic Basin position 2010 Liquefaction capacity LNG contracted for purchase 2010 2010 12 16 10 14 12 8 10 mtpa mtpa 6 8 4 6 4 2 2 0 0 ExxonMobil ENI BP…
BG Group Plan progress
Plan progression Lake Charles terminal 2nd expansion on-stream in July 06 1.8 bcf/d base capacity costs reduced to low 0.20s/mmBtu Infrastructure enhancement programme (IEP) planned New vaporisation technology NGLs extraction…
Plan progression Elba Island hub 2nd expansion BG Group capacity increases to 1.17 bcf/d by 2012 Cypress pipeline 0.5 bcf/d by 2012 Access to fast growing, premium markets: S.E. Georgia / N. Florida FERC approval June 2006 Elba…
Plan progression European import terminal progress Dragon LNG BG Group equity 50% BG Group capacity 2.2 mtpa 62% complete Start late 2007 Dragon LNG import terminal, UK Brindisi LNG BG Group equity 100% BG Group capacity 4.8…
Plan progression Chile LNG import terminal B R A Z I L PACIFIC B O L I V I A Terminal & supply OCEAN PA R A G U AY CHILE Quintero, near Santiago LNG facility ARGENTINA URUGUAY 2.5 mtpa terminal Santiago Buenos Aires 2009…
Plan progression OK LNG Slug Four train project, 5.5 mtpa each catcher Process Flares BG Group equity 13.5% LNG trains Initial development of two trains Buildings Utilities Free Trade Zone MOU Loading Condensate storage…
BG Group Supply and portfolio optimisation
Supply and portfolio optimisation Maximising the value of our LNG supply LNG Regasification Terminal Upstream of the terminal Downstream of the terminal Global LNG supply Gas Marketing Access to premium markets Access to premium…
BG Group Downstream of the import terminal
Supply and portfolio optimisation What is involved in gas marketing Objectives Transforming batch LNG to optimum time, form and location Delivering base value of LNG imports and creating upside Underpinning the flexibility of the LNG…
BG Group Upstream of the import terminal
Supply and portfolio optimisation What does it take to capture value in Global LNG marketing Flexible LNG Multiple markets own and /or others Infrastructure Shipping capacity Ability to execute people & skills A portfolio…
Supply and portfolio optimisation Global arbitrage 2005 BG Group share of the global spot trade in 2005 15% BG Group BG Group has US imports understanding of market and relationships 10% BG Group has flexibility BG Group to…
Supply and portfolio optimisation Global arbitrage 2006 BG Group evolution from spot purchases to long-term volumes BG Group term LNG volumes of 10 mtpa v 4 mtpa one year ago* Shipping an enabler 11 ships being used for BG Groups…
Supply and portfolio optimisation Global arbitrage decision making A portfolio optimisation An LNG supply business business Supply obligations Price / cost optimisation DES & FOB Price in multiple markets Capacity Diversion…
Supply and portfolio optimisation Global arbitrage Q1 2006 BG Group cargo diversions Q1-2006 Tight supply and short-term market shocks created Source Market Cargoes arbitrage opportunities. Egypt Spain 9 Spain, UK and Asia were…
Supply and portfolio optimisation LNG markets in the future The various LNG markets will continue to price in different ways Market structures and existing contracts are a barrier to change Continued market dislocations likely…
Conclusions Differentiated strategy Flexible LNG portfolio today Cost competitive long-term supply Cost competitive liquefaction, shipping & regasification A track record of delivery cost / time A track record of commercial…
BG Group Global LNG 48 Natural gas. Its our business
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